Mad about metered billing? They were in 1886, too

Think you're the first generation of consumers to gripe about metered access?

A New York Herald graphic of President Grover Cleveland answering the telephone.

Hopping mad about metered billing? Spluttering about tethering restrictions and early termination fees? Raging over data caps? You're not alone. Perhaps you can take some comfort from this editorial in The New York Times:

The greedy and extortionate nature of the telephone monopoly is notorious. Controlling a means of communication which has now become indispensable to the business and social life of the country, the company takes advantage of the public's need to force from it every year an extortionate tribute.

Nothing whatever

It was 1887, and Charles M. Fay, General Manager of the Chicago Telephone Exchange, had had about as much as he could take. The pseudo populist legislatures that kowtowed to telephone subscriber groups were on a rampage, Fay warned in a lengthy screed that appeared in the National Telephone Exchange Association's annual journal. Now they were demanding rate caps and price regulation—but for whom?

The poor and working class have "nothing whatever" to do with the telephone, and never will, Fay insisted. "Telephone users are men whose business is so extended and whose time is so valuable as to demand rapid and universal communication," he continued, leaving to posterity this remarkable claim about the service:

A laborer who goes to work with his dinner basket has no occasion to telephone home that he will be late to dinner; the small householder, whose grocer lives just around corner, would not pay once cent for a telephone wherewith to reach him; the villager, whose deliberate pace is never hurried, will walk every time the few steps necessary to see his neighbor in order to save a nickel. The telephone, like the telegraph, post office and the railroad, is only upon extraordinary occasions used or needed by the poor. It is demanded, and daily depended upon, and should be liberally paid for by the capitalist, mercantile, and manufacturing classes.

To be fair, Fay was right about the immediate moment. Given 1887 telephone subscription rates, hardly any workers or villagers bought regular telephone service. They couldn't afford it. But the Bell System's big problem in 1887 wasn't the poor and struggling masses. It was those "mercantile and manufacturing" types—also up in arms at Bell franchise prices.

Appalled at schemes like "measured service" for billing consumers for local calls, telephone subscribers launched municipal and state-wide reform campaigns, backed independent network providers, and ran "rate strikes" on more than one occasion.

"Telephomania," Fay bitterly called the phenomenon—the "only fit word" to describe these ingrates. But their largely forgotten uprisings made a difference.

"By demonstrating the vulnerability of operating companies to legislative intervention," writes John, "they goaded a new generation of telephone managers into providing telephone service to thousands of potential telephone users whom their predecessors had ignored. The popularization of the telephone was the result."

Countless threads of wire

A quick refresher on the early history of the telephone: Alexander Graham Bell obtained his electrical transmission patent in March 1876 and his telephone device patent about ten months later. In 1878, investors formed the National Bell company to make money from the patents. Western Union launched a rival exchange, but in 1879 ceded the business for a share of Bell's profits.

Equipped with Western Union's fifty or so fledgling exchanges, National Bell reorganized as American Bell. The company provided no telephone service. Instead, it licensed its patents and collected fees from locally based operating companies, which leased equipment and sold service to consumers.

American Bell made remarkable profit margins in the 1880s. They "hovered around 46 percent," John notes. Bell put some of these earnings back into the business; the rest went to shareholders. Not surprisingly, most Bell stockholders didn't sell their stock.

But while Bell became a company beloved by investors, the era of good feelings between the local operating franchises and their subscribers was short lived.

The overhead wire problem came first. Thanks to extant telegraph lines and New York City's new telephone exchange, the sky around Gotham had become darkened by "countless threads of wire," complained an English tourist in 1881.

This was more than just an aesthetic problem. One day walkers near New York City Hall looked up to see a horrible sight—the body of a Western Union lineman electrocuted by a stray wire. His corpse swayed about in full view for several hours before someone cut him down. Telegraph and telephone exchanges used low voltage lines, of course, but power companies did not, and the wiring systems of all three utilities sometimes got tangled.

When a Buffalo, New York operating company was sued in 1888 for a similar tragedy, the jury damned overhead wires as "secret and deadly traps to human life."

In response, city and state legislatures ordered the exchanges to tear their trapezes down and replace them with underground conduits. Manhattan buried its last aerial telephone cables in 1896. Other companies followed suit, albeit with considerable grumbling by their principals. An underground wire law was the "severest attack" that the telephone industry had yet to confront, warned Morris F. Tyler, President of Connecticut's Bell operating company. But this issue was only a taste of telephone wars to come.

The "Dead Head Evil"

At the dawn of local exchange telephony, most consumers were charged a "flat rate" within a given exchange territory. Some of these areas were only a few square miles (Chicago's was about 16.3 in 1889). As the exchange grew, so did the flat rate zone. Subscribers who wanted to reach someone beyond the unlimited access region paid an extra fee called a toll.

Subscribers liked flat rates, of course, since they were predictable. Operators quickly became less fond of them. "Most obviously, they increased operating costs as the exchange expanded," historian John notes. "Subscribers had no incentive to limit the number of outgoing calls, and, as the number of subscribers in the unlimited access zone expanded, they had more people to call."

Worst of all, from the operator point of view, was what one journalist called the "Telephone Dead Head Evil"—non-subscribers using the telephone of a subscriber; for instance, patrons of a local drug store using the phone for a nickel a call.

One Edward J. Hall of the Buffalo, New York exchange had a solution for this: measured service. Hall's plan consisted of a rental tithe for the telephone, plus ten cents for each telephone call. Consumers had to make at least 500 calls a year under this plan. Hall had a package for non-subscribers too: prepaid tickets that permitted the buyer a fixed number of calls.

Not all carriers liked this idea. Flat rates were simple. Measured service required additional bookkeeping. But these sort of plans had an attractive political advantage, John observes. "As long as operating companies charged every subscriber an identical monthly fee, subscribers had an obvious rallying cry: keep the rate low." Measured service "spoilt the unanimity" of fixed rates, Hall gleefully observed, making it harder for subscribers to protest their fees to legislators.

And that's why the first telephone consumers tried to kill measured service from the start.

Great read. The fairest price is the cost incurred by service. There's a fixed cost and/or a cost proportional to use. For actual resources flowing to the customer, like gas or water, the proportional cost dominates. I'd imagine for internet, it's a combination of the two.

THIS is why I love Ars. Great job! Interesting and provides historical context for current issues.

Also, I think there is a missing image. On page 2, you have the caption "A Thomas Nast cartoon shortly after the Supreme Court affirmed Alexander Graham Bell's patents (library of congress)" formatted as body text and no accompanying image.

Good read. I do like that you didn't print out the parallels and assume the reader is smart enough to get them.

The thing with providing Internet services is that the provision of it costs nearly nothing. It's the network expansion and upkeep that does. Which is why it makes no sense to create data caps. Speed caps sort of make sense, but data does not. It is only there so people who want more pay for more of the network.In North America, people just live so far apart.

To bad many companies have grown so big that it's difficult to get even just 1% to join you in a boycott. Maybe the monopolies wouldn't be gouging customers if it weren't so difficult to rally against them. And now that the supreme court has illegally ruled that money is equivalent to a person voice, it's impossible to stand up against them.

Before you try to argue the supreme court was right (and immediately lose the argument), they do have voices in Washington. They're called CEOs, presidents, owners, and lobbyists. Now that they can use their nearly bottomless pockets to corrupt Washington, don't expect to get Washington to listen to you; it's never going to happen until we can get the supreme court ruling overturned.

I applaud Am. Bell for its ability to stifle the cap in IN. That was brilliant. When something is taxed, the tax affects the usage or availability of that thing. Tax it too high and the availability may be non-existent.

Having said that, I don't get why companies who have a device that everyone wants/needs wouldn't lower the price to get greater coverage. Sure, their margins would be lower, but their profits would likely be higher.

To use an example, a company sells a device for $100 with a 45% profit margin. That's so high that only 500/10000 people in their market (0.5% market share) are able to buy - profit = $22,500. Now, they sell the device at $65, only $10 profit on each device, but they get greater coverage of 7000/10000 people in their market. $70,000 profit.

Now, I'm no economist, but my example can't be that far off (maybe the upper end market share is a bit high, maybe).

@Machtyn: your example only works if 6,500 people who didn't want the device at $100 suddenly decide they do when it costs only $65. When demand changes dramatically as prices fluctuate, it's said that the "price elasticity of demand is high" for the product. Often, however, demand is very *in*elastic: you can increase prices enormously without seeing the demand levels for it drop very much (think alcohol or tobacco: people will buy those *almost* regardless of the absolute price level. It's why they are easy targets for governments needing to raise revenue: add as much tax as you like to the price of beer and chances are the demand levels won't vary very much at all, so you rake in the extra cash as new revenue).

Back on topic, though: how price elastic is the demand for telephony devices? Because if it's high, then a $45 price drop *could* lift demand as you imagine. But if it isn't, and the massive price drop only brings in a few hundred new consumers, the company is just cutting its margins for no appreciable return.

I suppose it depends if we're talking Apple consumers or not: they certainly seem to be oblivious to price! So maybe the people in your example are price-sensitive PC users? :-)

I applaud Am. Bell for its ability to stifle the cap in IN. That was brilliant. When something is taxed, the tax affects the usage or availability of that thing. Tax it too high and the availability may be non-existent.

Having said that, I don't get why companies who have a device that everyone wants/needs wouldn't lower the price to get greater coverage. Sure, their margins would be lower, but their profits would likely be higher.

You need to think about the technology of the time. Automated exchanges were not yet built, and so each customer required a fraction of an operator to work with them. Clearly, this is more profitable for the premium service, scaling it up requires operators to be cheaper which is not so easy to do in a healthy growing economy. Plus switching centers have N*N issues in scaling up their interconnect.

Strowger swtches were invented in 1891 and were the basis of automated exchanges, which corresponds neatly to the 1900 date in the article at which American phones started to see broader usage. Later refinements like statistical modelling allowed exchanges to become very large without N*N scaling.

Luckily, there is no patent protection for wired TCP IP data transmission. Absolutely nothing would stop a competitor from setting up shop for a cheaper price if states choose to regulate prices. Nothing other than corruption will stop municipal internet build outs.

There are also corporate partners, such as Google, whose profit motive depends upon increased data access available for cities who are trapped by regulatory/legislative capture. I expect it to be a long hard fight, but this is a winnable (from the consumers standpoint) assuming the federal government doesn't pass asinine anti competitive rules.

The thing I take away from the fine article is that telephone calls were WAY too expensive from the start of the industry until AT&T was dismantled, $.10 in the 1880's was about equal to $2.25 today! I just wish we weren't quickly sliding backwards in the number of competitors in the telecommunications space, I think it's a real travesty that the FCC and Congress are allowing us to move back towards the system of few players that allowed such pricing to dominate for so long.

@Machtyn: your example only works if 6,500 people who didn't want the device at $100 suddenly decide they do when it costs only $65. When demand changes dramatically as prices fluctuate, it's said that the "price elasticity of demand is high" for the product. Often, however, demand is very *in*elastic: you can increase prices enormously without seeing the demand levels for it drop very much (think alcohol or tobacco: people will buy those *almost* regardless of the absolute price level. It's why they are easy targets for governments needing to raise revenue: add as much tax as you like to the price of beer and chances are the demand levels won't vary very much at all, so you rake in the extra cash as new revenue).

Back on topic, though: how price elastic is the demand for telephony devices? Because if it's high, then a $45 price drop *could* lift demand as you imagine. But if it isn't, and the massive price drop only brings in a few hundred new consumers, the company is just cutting its margins for no appreciable return.

I suppose it depends if we're talking Apple consumers or not: they certainly seem to be oblivious to price! So maybe the people in your example are price-sensitive PC users? :-)

In the case of sin taxes, raising them past a certain point always, without fail, creates a black market which results in reduced revenues. The main problem with the volume analysis of the original commenter is that the economies of scale in the early days of the telephone (think, giant analog, mechanical/operator managed connections, as well as the wire/pole headaches the article points out) were not as great. I'd imagine that service costs scaled more or less linearly and perhaps even logarithmically. This is not to say that increased volume at a lower price wouldn't generate some additional profit, just that the incentive to do so would not have been as great. My guess, don't shoot me, not an economist.

This is in vast contradistinction to current cell phone companies, for whom the marginal cost of additional users is negligible, and who are slow to upgrade infrastructure in any event, preferring to price gouge as much as possible.

Great read. The fairest price is the cost incurred by service. There's a fixed cost and/or a cost proportional to use. For actual resources flowing to the customer, like gas or water, the proportional cost dominates. I'd imagine for internet, it's a combination of the two.

You cannot forget that every company has costs even if their clients don't use their services. There's support, there's legal, there's logics, there's corporate, loads of stuff that people always like to forget.

"it costs you 2 cents for each gigabite I download, so I should only pay 2 cents!".

I agree that some people forget about the admin costs, but they are fixed costs. Maybe support has a fixed element plus a variable element due to heavy-users needing more support (though it tends to be occasional users that need most support, since heavy users know how to set up their own router, etc.).

The simple point is that the fairest billing is for a company to work out it's fixed cost per user and it's additional cost per unit of service (presumably a gigabyte for internet). They then add a profit margin and that's the price you pay.

From what I can tell, all costs of the internet are due to support/legal/admin fixed costs, plus additional cost for bandwidth. The additional cost for actually transferring data (i.e. per gigabyte) is essentially zero. The cost of monitoring data quantities is generally higher than the cost of delivering it. Hence 'fair' prices are a fixed cost plus an additional cost for higher bandwidth services.

Great read. The fairest price is the cost incurred by service. There's a fixed cost and/or a cost proportional to use. For actual resources flowing to the customer, like gas or water, the proportional cost dominates. I'd imagine for internet, it's a combination of the two.

You cannot forget that every company has costs even if their clients don't use their services. There's support, there's legal, there's logics, there's corporate, loads of stuff that people always like to forget.

"it costs you 2 cents for each gigabite I download, so I should only pay 2 cents!".

Bullshit.

You're right, that is bullshit. Because that gigabyte doesn't cost them a single red cent. They have infrastructure to maintain, which is relatively fixed overhead. They have a certain capacity on their infrastructure, and those costs are present regardless of amount of use. They aren't forced to give prorated refunds when your service goes down (unless it's for a very extended period, and even then, you'll rarely get much, if anything, and probably in the form of credit on your bill, not actual return of funds), nor when you aren't getting anywhere near what you paid for thanks to them overselling the capacity they _intentionally_ keep low (by putting profits to bonuses to the _exclusion_ of build-out).

The end result is that usage-based billing and data caps are unacceptable, unjustifiable, and is purely groping after extra money. Tiered service is, quite literally, double-dipping, as you already paid for a rate (and often a data cap), and trying to say I need to pay extra for skype, but not for google (or, for that matter, their _own_ voice offering), or exempting some things from limitations but not others, is simply attempting to charge a second time for something you already paid for. It's not hard to see.

So how is it Sweden was able to offer 100Mb/s symetric connections back in 2004, without data caps, without telling you you're not allowed to host a server, without packet shaping, without tiering, and all for ~US$80/month, at the same time that US$60/month would get you 3Mb/s down, 256Kb/s up, no servers allowed, hidden caps (think Comcast's was around 600GB at the time), and you're almost never actually going to see that full 3Mb/s thanks to intentionally insufficient and oversold infrastructure capacity? Clearly, the fees being charged were more than sufficient to cover that overhead, for the simple fact that the costs are nearly as astronomical as they're made out to be. The limiting factor isn't money (though it plays a part), but rather the logistics and regulations involved in laying the infrastructure in the first place.

You might want to look over this for some more info on just what their costs are, and just how they've been screwing us, all while being paid exorbitant sums, receiving grants and tax breaks, gouged prices, and favorable legislation to do so. Where's my internet like Sweden had almost a decade ago? I've certainly paid in enough for it.

I agree that some people forget about the admin costs, but they are fixed costs. Maybe support has a fixed element plus a variable element due to heavy-users needing more support (though it tends to be occasional users that need most support, since heavy users know how to set up their own router, etc.).

The simple point is that the fairest billing is for a company to work out it's fixed cost per user and it's additional cost per unit of service (presumably a gigabyte for internet). They then add a profit margin and that's the price you pay.

From what I can tell, all costs of the internet are due to support/legal/admin fixed costs, plus additional cost for bandwidth. The additional cost for actually transferring data (i.e. per gigabyte) is essentially zero. The cost of monitoring data quantities is generally higher than the cost of delivering it. Hence 'fair' prices are a fixed cost plus an additional cost for higher bandwidth services.

No, that's the thing. The only way to do usage based billing is in the form that we already have: connection speed. Because whether I use the service or not, it costs them the same amount. 1 bit or 100 terabytes, it's all the same. Charging for speed (read: access to a portion of the capacity) is the only fair way to charge different prices to different users. Further, receiving 10 bytes in 10 seconds, versus 10 bytes in 10 minutes, is a significant difference in network usage, yet your UBB would charge me the same either way, even though the 10 bytes in 10 minutes costs scant fractions of the capacity compared to the 10 bytes in 10 seconds.

Starting to see why it doesn't work? Costs are fixed, and the only thing variable is how much of the pipe I'm being given access to. They can make the pipe bigger (increase capacity), but charging based on how much I push through it doesn't change their cost to keep the pipe there. This is _not_ like water and power, which actual have the infrastructure _and_ something tangible moving through it. The more power you pull, the more power those generators need to produce to prevent overload (in the electronic sense) conditions. The more water I use, the less water there is for others, and the more they have to treat to make available. Such is not the case with the internet. The capacity is there, and passing bits doesn't consume anything. If you set a speed limit, you affect how much of that capacity I can take up, and whether I use it or not, your costs are the same.

Pay for the speed tier (which should be based solely on the actual costs, which are fixed), that's it, because that's the only fair "usage-based" billing model for this type _utility_.

EDIT:Apologies, I didn't read the alst part of your post where you said exactly what I have. I'll modify, expand, and clarify the above to better reflect that fact later today, I have a meeting to go to now.

<Snip> The only way to do usage based billing is in the form that we already have: connection speed. Because whether I use the service or not, it costs them the same amount. 1 bit or 100 terabytes, it's all the same. Charging for speed (read: access to a portion of the capacity) is the only fair way to charge different prices to different users. Further, receiving 10 bytes in 10 seconds, versus 10 bytes in 10 minutes, is a significant difference in network usage, yet your UBB would charge me the same either way, even though the 10 bytes in 10 minutes costs scant fractions of the capacity compared to the 10 bytes in 10 seconds.

Your model only works if there is enough capacity for everyone to use the speed they are paying for. This isn't all that different from the article where the phone company set up a price structure assuming one level of usage, but then people started using their phones more. The ISPs set up one set of prices, but now we're watching streaming movies and downloading OS X Lion. They didn't put the capacity in the system for that. Metering based on usage will discourage high bandwidth activity, and they won't have to upgrade. I'm not saying that's right, I'm just pointing out whether you use the system or not is not a fixed cost for them because there isn't enough to go around.

"The popularization of the telephone began around 1900," John writes. "At its core, it consisted of reenvisioning the telephone as a mass service for the entire population rather than a specialty service for an exclusive clientele."

So the phone started becoming a mass-market service 3 years after the Bell patents expired. Coincidence? I think not.

Maybe pointlessly pedantic of me, but the reason that the linesman got electrocuted was that back then all the lines where bare. Yep, even the power line was just a copper wire without insulation.

I think the detailed events goes that he was to work on the telegraph wire, but further down the street the electrical wire had snapped and gotten tangled with the telegraph wire. So that when he touched what he expected to be a low current wire he got a nasty shock to say the least.

I agree that some people forget about the admin costs, but they are fixed costs. Maybe support has a fixed element plus a variable element due to heavy-users needing more support (though it tends to be occasional users that need most support, since heavy users know how to set up their own router, etc.).

The simple point is that the fairest billing is for a company to work out it's fixed cost per user and it's additional cost per unit of service (presumably a gigabyte for internet). They then add a profit margin and that's the price you pay.

From what I can tell, all costs of the internet are due to support/legal/admin fixed costs, plus additional cost for bandwidth. The additional cost for actually transferring data (i.e. per gigabyte) is essentially zero. The cost of monitoring data quantities is generally higher than the cost of delivering it. Hence 'fair' prices are a fixed cost plus an additional cost for higher bandwidth services.

One tricky point about internet is that not all last mile solutions behave the same. Cable tv based solutions have more in common with mobile phone networks then say DSL, as the cable is shared between the subscribers. With DSL you got your individual phone wire going to the DSLAM at the local phone switch.

This means that if i attempt to max out my connection on cable, it impacts the rest of the people also trying to do the same, even if the backbone lines are more then capable of handing the total. On DSL however, it is first when it hits the DSLAM that the various user traffics interact. And if the related router and backbone can handle the total it just keeps on ticking.

Fiber is a odd case, as one can have active or passive. The active act like DSL while the passive act closer to cable. The difference is in how the various user traffic streams are being joined up. Active setups use switches and routers much like your DSL or ethernet. But passive do it on the frequency level, in a way more like cable or mobile radio.

And the meat of the issue is that passive fiber and cable have a bigger ROI thanks to cheaper installs (just run a big old wire from the switch to all the customers in the area). This especially with cable as one can basically pop it into place on top of existing TV service by dedicating a channel to the download side. But as the connection is shared, a single high traffic user can degrade the experience for the others on the loop. End result is either caps to discourage the heavy user(s) or split the loop into multiple ones. Two guesses on what has the biggest ROI impact...

always a fight over money the break up of at&t into operating companies and long lines / Western electricwas gleefully agreed to by bell. it federally broke the subsidization of home owners $7/month line[including phone] by long distance and office PBXs [at the time] protected by fifty state regulators.protected by polititions, protected by voters [home owners]

a fine deal all were happy with as long as it was a monopoly, but post carter-phone [decision] the cherries were being plucked by MCI, Sprint, and a host of cheap equipment manufacturers.

be careful of what you wish fordespite the too cheap to meeter LD offset by market rate on the last mile of Cutaxes are still the biggest component.

To bad many companies have grown so big that it's difficult to get even just 1% to join you in a boycott. Maybe the monopolies wouldn't be gouging customers if it weren't so difficult to rally against them. And now that the supreme court has illegally ruled that money is equivalent to a person voice, it's impossible to stand up against them.

Before you try to argue the supreme court was right (and immediately lose the argument), they do have voices in Washington. They're called CEOs, presidents, owners, and lobbyists. Now that they can use their nearly bottomless pockets to corrupt Washington, don't expect to get Washington to listen to you; it's never going to happen until we can get the supreme court ruling overturned.

But I forgot the Corporations were people.The Government says they are.Just another way of corruption except now we have legal corruption.This government is getting what it deserves for all their lying back room money passing anti consumer attitudes.

Metered billing? Who gets metered billing? Neither Verizon, AT&T nor T-Mobile will charge by the gigabyte. They charge a flat rate for a tiny sliver of bandwidth, and then punitive rates if you go above that. That's not the same as metered billing.

<Snip> The only way to do usage based billing is in the form that we already have: connection speed. Because whether I use the service or not, it costs them the same amount. 1 bit or 100 terabytes, it's all the same. Charging for speed (read: access to a portion of the capacity) is the only fair way to charge different prices to different users. Further, receiving 10 bytes in 10 seconds, versus 10 bytes in 10 minutes, is a significant difference in network usage, yet your UBB would charge me the same either way, even though the 10 bytes in 10 minutes costs scant fractions of the capacity compared to the 10 bytes in 10 seconds.

Your model only works if there is enough capacity for everyone to use the speed they are paying for. This isn't all that different from the article where the phone company set up a price structure assuming one level of usage, but then people started using their phones more. The ISPs set up one set of prices, but now we're watching streaming movies and downloading OS X Lion. They didn't put the capacity in the system for that. Metering based on usage will discourage high bandwidth activity, and they won't have to upgrade. I'm not saying that's right, I'm just pointing out whether you use the system or not is not a fixed cost for them because there isn't enough to go around.

And that being the case, they're selling you a bill of goods, and providing you with another. Bait and switch is most certainly illegal. Now ignoring the fact they've already been paid to improve infrastructure, and that no one else in the First World is having a problem providing high, uncapped speeds for low prices (except Australia, which has some geographic issues they run into, and lack of incentive or subsidization to build out to it), the fact remains that "crap, we can't let you use what we sold you, because we sold it to him too!" is not a valid excuse to extort more money from me. If you oversold it, then take some of the extensive profits you've been reaping for the last two decades, on unmet promises (and what is probably the greatest fraud case in American history), and put it into the infrastructure you were supposed to have build out those two decades ago with that money, instead of paying your board extra bonuses for a scam well run.

Further, if it were to discourage usage during peak hours (the only time you're likely to run into congestion issues -- that are actually quite minor, in the grand scheme, and that 90% of your users won't even notice), then you'd have them incentivizing that the way cell phones did, as opposed to capping usage, period. This isn't being done to alleviate congestion during times it's an actual issue, it's designed to extort additional money from the customer _and_ reduce overall usage at all times, so they can further oversell their capacity and increase profits, as opposed to actually expanding capacity in an attempt to drive us up from 16th in the world (and plummeting).

The problem isn't a case of not having enough, it's a case of knowing they don't have enough, knowing they wouldn't have enough, and selling it anyway without doing any of what would be required to support it. And yes, even with the increase in use of things like Skype, Hulu, and Netflix. It's like those bad movies about a time share where two of the "owners" show up the same weekend. Do some research into this, and you'll find that they were supposed to have all of this sorted out and _in place_ nearly two decades ago, with 80% of the country covered by 2006; they met 4% of the goal, then asked for further tax breaks, subsidies, and favorable legislation. You see how well that's going.

hobgoblin wrote:

BarkingGhostAR wrote:

Keytronic wrote:

All I have to say is: Breakup Ma Cell

Yeah, because it obviously worked the first time. NOT

As always with legislation, later generations can dismantle the older ones if they have the right incentive to do so...

As Hobgoblin notes, it _did_ work, until the Baby Bells were allowed to pull a T-2000 and start to coalesce back into a Ma Bell. We're down to what? Two Baby Bells left? Three? Hell, they might even keep it as two separate ones, to make it that much harder to break them up again, like needs to happen ("what do you mean? We're not a monopoly or a trust! We have the exact same policies? So? They did it first, we just copied it two days later because it worked and they didn't patent the business method!"; give it time, I'm sure the Federal Circuit will find a way to modify Bilski to let them fuck everything up the way software patents have and are; just look how well it's gone so far).

Great read. The fairest price is the cost incurred by service. There's a fixed cost and/or a cost proportional to use. For actual resources flowing to the customer, like gas or water, the proportional cost dominates. I'd imagine for internet, it's a combination of the two.

You cannot forget that every company has costs even if their clients don't use their services. There's support, there's legal, there's logics, there's corporate, loads of stuff that people always like to forget.

"it costs you 2 cents for each gigabite I download, so I should only pay 2 cents!".

Bullshit.

Bullshit is charging high margin prices for a service with near-zero margin costs. If there's a high fixed cost then charge a high fixed price. It's that simple.

Great read. The fairest price is the cost incurred by service. There's a fixed cost and/or a cost proportional to use. For actual resources flowing to the customer, like gas or water, the proportional cost dominates. I'd imagine for internet, it's a combination of the two.

I agree with you. However I do not believe the exorbitant fess for overages, or even for a metered service, the ISPs want to charge is within reason. Especially when they oversell their service and cannot provide the stated bandwidth. Although from the SamKnows effort it seems that most are trying to provide what they say they will.

I really do think that internet access should be considered as national/state infrastructure, much like highways, electricity, or natural gas, et. al.

Great read. The fairest price is the cost incurred by service. There's a fixed cost and/or a cost proportional to use. For actual resources flowing to the customer, like gas or water, the proportional cost dominates. I'd imagine for internet, it's a combination of the two.

STOP "imagining" and LEARN the real FACTS. The ONLY reason to sit back and "imagine" such anything is either pure laziness or being deceitful and trying to add on to the pile of misinformation.

Ask Small, Independent ISP's, if you can find any.Ask Communities with their own fiber.Ask ISP's in other High Tech Countries.

Hint: ALL OF THE ABOVE charge comparable prices for vastly superior service. In the case of Local Fiber, service is up to 100x faster.

Great read. The fairest price is the cost incurred by service. There's a fixed cost and/or a cost proportional to use. For actual resources flowing to the customer, like gas or water, the proportional cost dominates. I'd imagine for internet, it's a combination of the two.

You cannot forget that every company has costs even if their clients don't use their services. There's support, there's legal, there's logics, there's corporate, loads of stuff that people always like to forget.

"it costs you 2 cents for each gigabite I download, so I should only pay 2 cents!".

Bullshit.

1- Nationalize them all.2- Fire legal, management, support and everyone that not a sysadmin or network technician.3- Lower price and raise caps.4- Be called a communist by some backward Americans.

Great read. The fairest price is the cost incurred by service. There's a fixed cost and/or a cost proportional to use. For actual resources flowing to the customer, like gas or water, the proportional cost dominates. I'd imagine for internet, it's a combination of the two.

I agree with you. However I do not believe the exorbitant fess for overages, or even for a metered service, the ISPs want to charge is within reason. Especially when they oversell their service and cannot provide the stated bandwidth. Although from the SamKnows effort it seems that most are trying to provide what they say they will.

I really do think that internet access should be considered as national/state infrastructure, much like highways, electricity, or natural gas, et. al.

Ummmm, what part of offering 3Mb/s down, 256Kb/s up, for US$60/month with a (hidden) 600GB cap is reasonable in the face of 100Mb/s up, 100Mb/s down, for US$80/month and no cap _at the same time_? The very fact that it _looks_ reasonable when you ignore the rest of the world and _only_ look at the US is one of the big things being complained about: _artificial_ scarcity. The ISPs have active _dis-incentives_ to improve capacity and performance. If they improve capacity to meet demand and need (which they've already been more than paid for), they would no longer be able to make the argument for their policies and prices _sound_ reasonable, because they wouldn't be (and aren't now, because the scarcity _is_ artificial, intentional, and very thoroughly thought out.) Please read some of the stuff on Teletruth, particularly this PDF. If, like me, most of it will sound familiar to you, and their evidence is almost exclusively from the Baby Bells themselves (meaning it's probably worse than the conclusions reached, since the Baby Bells have reason to make their numbers sound better).

Bullshit is charging high margin prices for a service with near-zero margin costs. If there's a high fixed cost then charge a high fixed price. It's that simple.

Exactly. Just like other industries like movies, airline tickets, books, software, cloud computing, etc.. Even Ars! All are great examples of chiefly fixed costs industries charging their customers based on their costs...

Great read. The fairest price is the cost incurred by service. There's a fixed cost and/or a cost proportional to use. For actual resources flowing to the customer, like gas or water, the proportional cost dominates. I'd imagine for internet, it's a combination of the two.

You cannot forget that every company has costs even if their clients don't use their services. There's support, there's legal, there's logics, there's corporate, loads of stuff that people always like to forget.

"it costs you 2 cents for each gigabite I download, so I should only pay 2 cents!".

Bullshit.

1- Nationalize them all.2- Fire legal, management, support and everyone that not a sysadmin or network technician.3- Lower price and raise caps.4- Be called a communist by some backward Americans.

You forgot,5- Tax everyone (whether they use the service or not) to pay legal, management, support, etc.

And considering the usual government bureaucracy, we'll end up paying more overall.

Bullshit is charging high margin prices for a service with near-zero margin costs. If there's a high fixed cost then charge a high fixed price. It's that simple.

Exactly. Just like other industries like movies, airline tickets, books, software, cloud computing, etc.. Even Ars! All are great examples of chiefly fixed costs industries charging their customers based on their costs...

I'm sorry, it appears that you forgot to make a point.

Would you like to try again?

Good luck, though, because lumping software and books together makes little sense. Raw materials that go into physical printed books are expensive. Software not so much. Also, books are heavy and therefore harder to deliver to consumers. Software can just be downloaded.

Likewise, airline tickets seem to be an oddball on your list with no point to it. Jet fuel is very, very expensive and airlines use a _LOT_ of it. HINT: it doesn't matter if your plane has 1 passenger or 1000, it still needs about the same amount of fuel to fly.

Great read. The fairest price is the cost incurred by service. There's a fixed cost and/or a cost proportional to use. For actual resources flowing to the customer, like gas or water, the proportional cost dominates. I'd imagine for internet, it's a combination of the two.

You cannot forget that every company has costs even if their clients don't use their services. There's support, there's legal, there's logics, there's corporate, loads of stuff that people always like to forget.

"it costs you 2 cents for each gigabite I download, so I should only pay 2 cents!".

Bullshit.

1- Nationalize them all.2- Fire legal, management, support and everyone that not a sysadmin or network technician.3- Lower price and raise caps.4- Be called a communist by some backward Americans.

You forgot,5- Tax everyone (whether they use the service or not) to pay legal, management, support, etc.

And considering the usual government bureaucracy, we'll end up paying more overall.

No need to tax everyone. The network is already self sustaining with its current user base. It cannot get any worse.

Its gonna be less since you don't need to pay bonuses, advertisement, sales people, legal, upper management and, above all, generate profits. Its exactly like health care or electricity, at the end of the day having a nationalized entity is cheaper than leaving it to the private sector. For the essential services at least.

Great read. The fairest price is the cost incurred by service. There's a fixed cost and/or a cost proportional to use. For actual resources flowing to the customer, like gas or water, the proportional cost dominates. I'd imagine for internet, it's a combination of the two.

You cannot forget that every company has costs even if their clients don't use their services. There's support, there's legal, there's logics, there's corporate, loads of stuff that people always like to forget.

"it costs you 2 cents for each gigabite I download, so I should only pay 2 cents!".

Bullshit.

1- Nationalize them all.2- Fire legal, management, support and everyone that not a sysadmin or network technician.3- Lower price and raise caps.4- Be called a communist by some backward Americans.

You forgot,5- Tax everyone (whether they use the service or not) to pay legal, management, support, etc.

And considering the usual government bureaucracy, we'll end up paying more overall.

No need to tax everyone. The network is already self sustaining with its current user base. It cannot get any worse.

Its gonna be less since you don't need to pay bonuses, advertisement, sales people, legal, upper management and, above all, generate profits. Its exactly like health care or electricity, at the end of the day having a nationalized entity is cheaper than leaving it to the private sector. For the essential services at least.

Bonuses, advertisements and sales would be less, but legal and management costs don't go away. The network might be self sustaining until it needs an upgrade, at which point the government usually takes out bonds to pay for infrastructure. These, plus interest, need to be paid back eventually. Regarding profits, you said that you were going to lower prices. Also, public sector employees are considerably more expensive due to benefits. And frankly, I'm not sure if I want if I want to deal with public sector tech support. Whether it's a private or government monopoly, you get MUCH worse service when there isn't competition.

Bonuses, advertisements and sales would be less, but legal and management costs don't go away. The network might be self sustaining until it needs an upgrade, at which point the government usually takes out bonds to pay for infrastructure. These, plus interest, need to be paid back eventually. Regarding profits, you said that you were going to lower prices. Also, public sector employees are considerably more expensive due to benefits. And frankly, I'm not sure if I want if I want to deal with public sector tech support. Whether it's a private or government monopoly, you get MUCH worse service when there isn't competition.

Matthew Lasar / Matt writes for Ars Technica about media/technology history, intellectual property, the FCC, or the Internet in general. He teaches United States history and politics at the University of California at Santa Cruz.